The RERA 70 Percent Escrow Rule: How Your Money Is Protected in Bengaluru

Before RERA, a familiar Bengaluru story played out again and again: a buyer paid steadily towards an under construction flat, only to watch the site fall silent while the builder poured the money into a shinier new launch across town. The cash meant for one tower quietly funded another, and the first set of buyers waited years for a home their payments had already covered. The single rule that most directly attacks this old habit is the RERA requirement that most of your money stay locked to your project.

The short answer. Under RERA, a promoter must deposit at least 70 percent of the money collected from buyers of a project into a separate bank account, to be used only for that project's construction and land cost. Withdrawals are allowed only in proportion to how much of the project is actually built, and each must be certified by the project engineer, architect, and a chartered accountant. The trade-off to know: this rule sharply reduces the risk of your money being diverted, but it is not a guarantee of on time delivery, so you still verify the project and track its progress.

What is the RERA 70 percent escrow rule?

The rule requires a builder to ring fence most of your money in a dedicated account for your project alone. Section 4(2)(l)(D) of the Real Estate (Regulation and Development) Act, 2016 says the promoter must maintain a separate account for every project, into which at least 70 percent of the amounts realised from allottees is deposited, to cover the cost of construction and the cost of land. The money in that account cannot lawfully be spent on anything but that project.

This is the provision that ended the practice of freely moving buyer money from one project to another. By tying 70 percent of collections to the specific project that generated them, the law tries to ensure that the flats you are paying for actually get built, rather than becoming the seed capital for the builder's next venture. For a buyer, it is one of the strongest structural protections RERA introduced, because it works quietly in the background of every instalment you pay rather than depending on you to enforce it deal by deal.

Why does the escrow rule protect a Bengaluru buyer?

It protects you because the most common cause of stalled projects was fund diversion, and this rule targets exactly that. When money collected for your tower can be spent only on your tower, a builder can no longer keep launching new projects on the strength of your instalments while your own construction starves. The rule aligns the flow of cash with the physical progress of the very building you are actually buying into.

The protection is real but bounded, and it helps to be clear eyed about that. The rule reduces the chance that your money vanishes into unrelated ventures, but it does not insure you against honest delays, cost overruns, or poor execution. That is why it works best alongside the other RERA tools rather than as a standalone shield, and it is sensible to think of it as protecting the destination of your money rather than the calendar of your possession. A builder can still miss deadlines even while spending honestly, which is why a delay can still trigger the remedies described in our guide to RERA Section 18 and your rights on delayed possession.

How can a builder withdraw money from the escrow account?

A builder can withdraw from the account only in proportion to how much of the project is actually complete, and only with professional sign off. The law ties each drawdown to the percentage of completion, so a project that is, say, 40 percent built allows the promoter to draw broadly in line with that stage, not to empty the account at the start. This keeps the available cash matched to the work genuinely done.

Crucially, the withdrawal is not left to the builder's word. It must be certified by three independent professionals, whose separate roles are set out in the table below. Only after these certificates are in place should the bank release the funds, which is why a compliant project leaves a clear paper trail of engineer, architect, and chartered accountant certificates behind every withdrawal. This three way check is deliberately hard for any single party to fake, because the engineer, the architect, and the chartered accountant each certify a different fact, and the bank is expected to release money only when all three line up.

What does the 70 percent rule not cover?

The rule governs where your money must go, not whether the home arrives on time or well built. The remaining portion of collections outside the 70 percent can be used more flexibly by the promoter, and the rule does not promise a completion date, a quality standard, or a clear title. It is a financial discipline on how funds are used, not a warranty on the quality or timing of the finished flat.

So a buyer should treat the escrow rule as one layer of protection among several, not the whole shield. You still need to verify the project is registered, read its declared timelines, check the title and approvals, and track construction as it proceeds. The rule makes it harder for your money to be misused, but the responsibility to choose a credible project and monitor it remains yours. Think of the escrow rule as a strong lock on one door, while a careful buyer still checks that the other doors, the title, the approvals, and the timeline, are sound before moving in.

How can you check a project is following the rule?

You check indirectly, because you will not see the builder's bank statements, but the signals are there. First, deal only with a RERA registered project, since the separate account obligation attaches to registered projects and the registration itself signals the promoter has entered the RERA framework. A project that is not registered gives you neither this protection nor a reliable way to hold the builder to it.

Second, pay only into the account the builder is required to use, keep every receipt, and be wary if you are asked to route large sums through informal channels or a personal account. Ask, in writing, for confirmation of the project's designated account for buyer payments. If a builder is evasive about where your money is going, treat that as a warning sign worth taking seriously before you pay another instalment.

What can you do if you suspect fund diversion?

If you suspect your money is being misused or the project has stalled, you can take the matter to the regulator rather than only waiting and hoping. Because a registered project sits within RERA, you can raise a complaint with the state authority about non compliance, delay, or misuse, and seek the remedies the law provides. Keeping clean records of every payment and communication makes any such complaint far stronger.

Acting early matters, since problems are easier to address before a project collapses than after. Gather your agreement, receipts, and any evidence of stalled work, and follow the process set out in our guide to filing a K RERA complaint in Karnataka. The escrow rule gives your money a protected home; the complaint mechanism gives you a way to enforce it.

How do you protect your money as a buyer?

Combine the legal escrow protection with your own careful, everyday discipline as a buyer. The checklist below helps a Bengaluru buyer keep their instalments safe through an under construction purchase.

1. Buy only into a RERA registered project so the separate account rule applies.
2. Confirm in writing the account into which buyer payments should be made.
3. Pay through traceable banking channels and never large sums in cash.
4. Keep every receipt and payment record in one place.
5. Track construction progress against the project's declared timeline.
6. Be cautious if asked to pay ahead of the agreed, stage linked schedule.
7. Raise a complaint early if work stalls or money seems to be misused.

Do this and you turn a legal protection into a practical one, backed by your own records. The rule keeps 70 percent of your money tied to the home you are buying, and a careful buyer makes sure the remaining trust is earned rather than assumed, whether the project is a compact development or a large one such as Tata Carnatica Phase 1.

Frequently asked questions

What is the RERA 70 percent rule? Under Section 4 of RERA, a promoter must deposit at least 70 percent of the money collected from buyers of a project into a separate bank account, used only for that project's construction and land cost. It exists to stop builders diverting your money to other projects, a common cause of stalled construction.

Can a builder use my money for another project? No, not the protected portion. At least 70 percent of what buyers pay must stay in the project's separate account and be spent only on that project's construction and land cost. This is designed precisely to prevent a builder from funding other ventures with your instalments, though you should still track progress.

How does a builder withdraw from the RERA account? A builder can withdraw only in proportion to the construction actually completed, and each withdrawal must be certified by the project engineer, the architect, and a chartered accountant. The bank releases funds only against these certificates, which keeps the money available matched to the work genuinely done on the ground.

Does the 70 percent rule guarantee my flat is delivered on time? No. The rule controls how your money may be used, not whether the project finishes on schedule or to a given standard. It reduces the risk of fund diversion but does not insure against delays or cost overruns, so verify the project and use RERA's other remedies if a delay occurs.

Last updated 2026-09-06. PropNewz Team.